Archrock, Inc. Fair Value Disclosure
25. Fair Value Measurements
The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories:
| ● | Level 1 – quoted unadjusted prices for identical markets in active markets to which we have access at the date of measurement. |
| ● | Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model–derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered markets makers. |
| ● | Level 3 – model–derived valuation in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information. |
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Investment in ECOTEC
As of December 31, 2025, we owned a 25% equity interest in ECOTEC in which we have elected the fair value option to account for this investment.
The fair value determination of our investment in ECOTEC primarily consisted of unobservable inputs, which creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement, which was valued through an average of an income approach (discounted cash flow method) and a market approach (guideline public company method), are the WACC and the revenue multiples. Significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement. This fair value measurement is classified as .
The significant unobservable inputs are as follows:
Significant | Year Ended | Year Ended | |||||||||||||
Unobservable | December 31, 2025 | December 31, 2024 | |||||||||||||
Inputs | Range | Median | Range | Median | |||||||||||
Valuation technique: | | ||||||||||||||
Discounted cash flow | WACC | 0.0% - 17.8% | 11.1% | 0.0% - 17.0% | 12.9% | ||||||||||
Guideline public company | Revenue multiple | 1.6x - 7.6x | 5.3x | 1.6x - 7.3x | 4.3x | ||||||||||
The reconciliation of changes in the fair value of our investment in ECOTEC is as follows:
(in thousands) | 2025 | 2024 | ||||
Balance at beginning of period | $ | 14,671 | $ | 14,905 | ||
Purchases of equity interests | — | 1,250 | ||||
(25) | (1,484) | |||||
Balance at end of period | 14,646 | 14,671 | ||||
| (1) | Included in other expense, net in our consolidated statement of operations. |
See Note 12 (“Investments in Unconsolidated Affiliates”) for further details.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Investments in Unconsolidated Affiliates and Other Strategic Investments
As of December 31, 2025 and 2024, the carrying value of our investments in which we have elected the fair value measurement alternative was $10.6 million and $5.5 million, respectively, and is included in other assets in our consolidated balance sheets. There were no upward adjustments, impairments or downward adjustments to the carrying value of these investments as of both December 31, 2025 and 2024. See Note 12 (“Investments in Unconsolidated Affiliates”) for further details.
Compression Fleet
During the years ended December 31, 2025 and 2024, we recorded nonrecurring fair value measurements related to our idle compressors. Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared to other fleet units we recently sold, and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of four years. These fair value measurements are classified as Level 3.
The fair value of our impaired compression fleet impaired was as follows:
(in thousands) | 2025 | 2024 | ||||
Impaired compression fleet | $ | 871 | $ | 1,048 | ||
The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compression fleet being measured. Additional quantitative information related to our significant unobservable inputs follows:
| Range | | Weighted Average (1) | |
Estimated net sale proceeds: | ||||
As of December 31, 2025 | $0 - $241 per horsepower | $54 per horsepower | ||
As of December 31, 2024 | $0 - $188 per horsepower | $46 per horsepower |
See Note 21 (“Long-Lived and Other Asset Impairment”) for further details.
Other Financial Instruments
The carrying amounts of our cash, receivables and payables approximate fair value due to the short–term nature of those instruments.
The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to its variable interest rate. The fair value of these outstanding borrowings is a Level 3 measurement.
The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows:
December 31, | ||||||
(in thousands) | 2025 | 2024 | ||||
Carrying amount of fixed rate debt (1) | $ | 1,500,000 | $ | 1,800,000 | ||
| 1,527,000 |
| 1,796,000 | |||
| (1) | Carrying amounts exclude unamortized debt premium and deferred financing costs. See Note 15 (“Long-Term Debt”) for further details. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 29, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.